Insurer Ordered to Pay Arson Claim Despite Director's Past Convictions

The restaurant, operating from a leased premises, secured coverage from QBE. On August 2, 2024, an arson attack destroyed the restaurant's contents and halted operations. While the perpetrator was apprehended, QBE declined the claim, pointing to the non-disclosure of the director's past criminal convictions.

The director contended that the omission was unintentional and emphasized his efforts toward rehabilitation. He argued that this oversight should not impact the claim's validity and even offered to pay any additional premiums that might have been applicable had his history been disclosed.

QBE maintained that disclosure of the convictions would have led them to refuse coverage. However, AFCA found that the insurer could not provide concrete evidence of the specific questions asked during the policy's inception. The broker utilized an electronic platform linked to QBE's systems, but the insurer failed to furnish screenshots or detailed records of the application process.

AFCA highlighted that one potential question might have inquired whether "the insured" had been convicted of a criminal offense. In this context, "the insured" referred to the company, which had no criminal record. The authority noted the distinction between the insured entity and its director, emphasizing the lack of clarity in the insurer's questioning.

Consequently, AFCA determined that QBE had not substantiated its claim of non-disclosure and, therefore, could not deny the claim or cancel the policy. The insurer was instructed to reinstate the policy and proceed with settling the claim in accordance with its terms and conditions.

This case underscores the necessity for both insurers and policyholders to ensure clear and comprehensive communication during the policy application process. For restaurant owners, it is crucial to provide full disclosure of all relevant information to avoid potential disputes. Simultaneously, insurers must ensure their application processes are transparent and well-documented to uphold the integrity of coverage agreements.